Monsanto may lose billions in GM soy royalties row

Monsanto faces the loss of billions of euros in revenues from its genetically-modified (GM) soy in Brazil after the country’s Supreme Court ruled that any decision reached in a local court case should apply nationally.

The decision relates to an impressive legal battle, in which five million Brazilian farmers are trying to recover payments made to the company over the past decade. If the case is won, the biotech colossus faces costs of up to €6.2bn ($7.5bn).

"The values involved could total 15 billion reais ($7.5bn)," the Superior Tribunal of Justice said on its Web site.

An initial decision made by a local Brazilian court in April ruled that the biotech enterprise could not charge farmers for use of their genetically modified soy because patents relating to the modified crop have already expired in Brazil. The verdict ordered Monsanto to stop collecting royalties, and return those collected since 2004 to farmers – or pay back a minimum of €1.5bn ($2bn).

However Monsanto appealed the judgment – which has, for now at least, been suspended pending a further hearing by the Justice Tribune of the local court in Rio Grande do Sul.

Wide reaching

The ruling by the Brazilian Supreme Court of Justice relates to how wide reaching any decision made by the court will be. Monsanto had argued any final ruling in the local court should be limited to Rio Grande do Sul area where the case has been brought– rather than be applied nationally.

However the Brazilian Supreme Court of Justice ruled against Monsanto, deciding unanimously that any ruling by the Justice Tribune of Rio Grande do Sul – once it is made – should apply to the whole of Brazil.

Monsanto now face paying back billions of euros to the farmers in the form of repayments, in addition to losing out on future royalties.

Battle history

The case against Monsanto began in 2009, after a consortium of Brazilian farmers from the southern state of Rio Grande do Sul decided to sue Monsanto – arguing that royalty charges they are forced to pay are unjust.

The legal outcome hinges on two laws in Brazil: One recognizes international patents; the other permits producers, especially small ones, to use their crop as seed without paying the original seed provider.

Farmers claim Monsanto has been gathering excessive profits from ‘renewal’ seed harvests, from crops planted using seed from the previous year’s harvest. Because Monsanto owns the patent to the genetically modified seed, the company charges farmers a royalty fee for the original crops and also for later harvests.

"Monsanto gets paid when it sell the seeds. The law gives producers the right to multiply the seeds they buy and nowhere in the world is there a requirement to pay (again). Producers are in effect paying a private tax on production," said Jane Berwanger – a lawyer acting for the farmers.

The case continues.

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Monsanto faces the loss of billions of euros in revenues from its genetically-modified (GM) soy in Brazil after the country’s Supreme Court ruled that any decision reached in a local court case should apply nationally.